The Asian Development Bank (ADB) has drastically cut the growth rate estimate of the Indian economy in this financial year. The ADB has said that in FY 2019-20, India's GDP can grow only 5.1 percent. Earlier, ADB had released an estimate of GDP growth of 6.5 percent in September.
What did ADB say
The ADB said that due to sluggish pace of job creation and poor crop conditions in rural areas, it had to cut its estimate. Referring to the IL&FS case, the ADB also said that the ruin of a large non-banking financial company in the year 2018 increased the financial sector's risk and led to a debt crisis.
ADB said, 'India's growth rate may slow down to 5.2 per cent in FY 2019-20. Due to the crisis in a large non-banking financial company, the financial sector has increased the risk and the debt crisis has arisen. Apart from this, consumption has been affected due to slowing down the pace of job creation and increasing crisis in rural areas due to poor crop.
The ADB said that if the government adopts the right policies, the GDP growth rate could reach 6.5 percent in the next financial year.
Significantly, in the second quarter of the current financial year (2019-20), the GDP figure has reached 4.5 percent. This is the biggest decline in any one quarter in almost 6 years. Earlier, the country's GDP rate was at this level in the March 2013 quarter.
These figures of GDP are a big challenge for the Narendra Modi government at the Center. Actually, the government is working on the goal of $ 5 trillion economy in its 5-year term. Expert believes that to achieve this target, the rate of GDP growth must be more than 8 percent.
Many agencies have cut estimates
Earlier this month, Crisil ratings had lowered India's GDP growth forecast for FY2020 to 5.1 percent from 6.3 percent. Crisil attributed this to weak growth in private consumption, weak growth in tax collections and factors other than industrial production.
After this, on 5 December, the Reserve Bank of India, in its monetary policy review, reduced the country's GDP growth estimate from 6.1 per cent to 5 per cent during FY 2019-20.